The investors, which include Threadneedle Investments, Royal London Asset Management and Railpen, have signed a position paper demanding a return to “prudent” accounting regulations for banks.

They argued that the “fair value” system, introduced when International Financial Reporting Standards (IFRS) were adopted in 2005, allow banks to hide poor loans. The build-up of risk as a result is not just dangerous for the banks but it also contradicts the requirment for directors to present accurate accounts under Company law.

In the paper, organised by the Local Authority Pension Fund Forum (LAPFF), the investors say state that the “believe that the adoption of IFRS - with its emphasis on neutrality - has seriously weakened the implementation of prudent accounting in practice”.

They added: “We believe an independent review is urgently needed to establish whether the current endorsement process for IFRS standards in the EU is delivering prudent accounts, as required by EU Company Law.”

LAPFF chairman Councillor Kieran Quinn said: “Over the past two years LAPFF has repeatedly made clear its view that the IFRS framework is legally faulty. The FRC has consistently denied that. However, this opinion suggests that something has indeed gone very badly wrong in the standard setting process, leading to the conclusion that IFRS should be overridden.”